Interactions of Bargaining Power and Introduction of Online Channel in Two Competing Supply Chains

Abstract

This paper studies the effect of dual-channel format on supply chain’s competition ability and the effect of different bargaining powers on the competition between two supply chains and the optimal pricing decisions of all supply chain members when one supply chain introduces an online retailing channel. We develop four game models and obtain the optimal pricing decisions in closed form of these models and give some sensitivity analysis through numerical approach. Some new managerial insights are obtained as follows: Regardless of the two supply chain members’ bargaining forms, the optimal price, the maximal demand, and the maximal profit decrease as the self-price sensitivity decreases. The industry holds advantage in getting higher profit when the supply chain without online retailing channel is led by the retailer. In addition, we find that a manufacturer as a leader of its supply chain can get more profit when the competing supply chain’s leader is the manufacturer than when the competing supply chain’s leader is the retailer.